FedEx Corp. Reports Fourth Quarter Earnings

June 19, 2012

MEMPHIS, Tenn., June 19, 2012 … FedEx Corp. (NYSE: FDX) today reported earnings of $1.73 per diluted share for the fourth quarter ended May 31, which includes a previously announced $0.26 per diluted share non-cash aircraft impairment charge at FedEx Express. Excluding this charge, earnings were $1.99 per diluted share in the fourth quarter compared to $1.75 per diluted share a year ago.

“FedEx delivered strong earnings results for fiscal 2012 due to the outstanding performance by FedEx Ground, our new value proposition at FedEx Freight and improved yields across all transportation segments,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “In fiscal 2013, we will continue our focus on improving our operating efficiencies and our financial performance across all of our businesses, while simultaneously enhancing our service capabilities. We remain absolutely committed to higher earnings, margins, cash flows and returns.”

Fourth Quarter Results

FedEx Corp. reported the following consolidated results for the fourth quarter:

Fiscal 2012

Fiscal 2011

As Reported

(GAAP)

YOY

%

Before Aircraft Impairment Charge

YOY

%

As Reported

(GAAP)

Revenue

$11.0 billion

4

$11.0 billion

4

$10.6 billion

Operating Income

$856 million

(4)

$990 million

11

$888 million

Operating Margin

7.8%

9.0%

8.4%

Net Income

$550 million

(1)

$634 million

14

$558 million

Diluted EPS

$1.73

(1)

$1.99

14

$1.75

As announced on June 4, 2012, during the quarter FedEx Express permanently retired from service 18 Airbus A310-200 aircraft and 26 related engines, as well as six Boeing MD10-10 aircraft and 17 related engines. As a consequence, a non-cash impairment charge of $134 million ($84 million, net of tax, or $0.26 per diluted share) was recorded in the fourth quarter. The decision to permanently retire these aircraft will better align the U.S. domestic air network capacity of FedEx Express to match current and anticipated shipment volumes.

FedEx Corp. reported the following consolidated results for the full year:

Fiscal 2012

Fiscal 2011

As Reported

(GAAP)

Before Aircraft Impairment Charge and Legal Reserve Reversal

As Reported

(GAAP)

Before Freight Costs and Legal Reserve

Revenue

$42.7 billion

$42.7 billion

$39.3 billion

$39.3 billion

Operating Income

$3.19 billion

$3.28 billion

$2.38 billion

$2.54 billion

Operating Margin

7.5%

7.7%

6.1%

6.5%

Net Income

$2.03 billion

$2.09 billion

$1.45 billion

$1.56 billion

Diluted EPS

$6.41

$6.59

$4.57

$4.90

Capital spending for fiscal 2012 was $4.0 billion, of which $1.9 billion was for investments in aircraft and related equipment.

Outlook

“We are focused on improving margins in all businesses, although we face certain cost increases in fiscal 2013,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “These headwinds include higher employee-related costs, including higher pension expenses of approximately $150 million due to a historically low discount rate on our May 31, 2012 measurement date, as well as higher depreciation costs. We expect to mitigate these challenges by reducing costs and improving efficiencies, and are continuing to evaluate additional actions to substantially improve FedEx Express margins.”

FedEx projects earnings to be $1.45 to $1.60 per diluted share in the first quarter and $6.90 to $7.40 per diluted share for fiscal 2013. This earnings guidance does not include the impacts of the significant cost reduction programs currently under review that should be announced in the fall. The company’s outlook assumes U.S. GDP growth of 2.2% and world GDP growth of 2.6% during the fiscal year. FedEx reported earnings of $1.46 per diluted share in last year’s first quarter. Capital spending for fiscal 2013 is expected to decline to $3.9 billion, with fewer aircraft deliveries at FedEx Express and increased investment in the high-margin, high-return FedEx Ground business.

FedEx Express Segment

For the fourth quarter, the FedEx Express segment reported:

Fiscal 2012

Fiscal 2011

As Reported

(GAAP)

YOY

%

Before Aircraft Impairment Charge

YOY

%

As Reported

(GAAP)

Revenue

$6.80 billion

3

$6.80 billion

3

$6.63 billion

Operating Income

$281 million

(34)

$415 million

(3)

$429 million

Operating Margin

4.1%

6.1%

6.5%

U.S. domestic revenue per package grew 6% due to higher rate per pound, the growth of the premium FedEx First Overnight service and fuel surcharges, while average daily package volume declined 5%. FedEx international priority (IP) revenue per package grew 3% due to higher package weights and fuel surcharges, while average daily package volume decreased 3% driven by year-over-year declines from Asia. IP freight pounds increased 3%, while revenue per pound decreased 4% due to lower rate per pound. In total, IP package and freight pounds increased 2% and revenue decreased 1% year-over-year. IP revenue growth was affected by a lower-yielding mix of services, consisting of growth in deferred services and declines in premium services.

Operating income and margin were impacted by the aircraft impairment charge as well as declining package volumes. The demand shift toward lower-yielding international services also negatively affected margins, partially offset by the year-over-year benefit of the fuel surcharge timing lag.

FedEx Ground Segment

For the fourth quarter, the FedEx Ground segment reported:

• Revenue of $2.48 billion, up 9% from last year’s $2.26 billion

• Operating income of $494 million, up 18% from $417 million a year ago

• Operating margin of 20.0%, up from 18.4% the previous year

Operating income and margin reached record highs in the quarter primarily due to increased yield and volume. Revenue per package increased 5% primarily due to increased rates and higher extra services. Average daily package volume grew 3% in the quarter, driven by growth in both FedEx Home Delivery and business-to-business services. FedEx SmartPost average daily volume increased 16% primarily due to growth in e-commerce. FedEx SmartPost revenue per package increased 7% due to increased rates.

FedEx Freight Segment

For the fourth quarter, the FedEx Freight segment reported:

• Revenue of $1.40 billion, up 7% from last year’s $1.31 billion

• Operating income of $81 million, up 93% from $42 million a year ago

• Operating margin of 5.8%, up from 3.2% the previous year

Operating income and margin increased primarily due to higher yield, volume growth and continued improvements in operational efficiencies. Less-than-truckload (LTL) average daily shipments increased 4% due to an increase in customer demand for the company’s service offerings, enhanced service levels and modest economic improvement. LTL yield increased 4% due to higher fuel surcharges and base yield improvement. Effective July 9, 2012, FedEx Freight will increase U.S. and certain other shipping rates by 6.9%.

As part of its ongoing commitment to continuous improvement, FedEx Freight will be making some adjustments to its network on July 9, 2012 to drive incremental operational efficiencies and further enhance the customer experience.

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $43 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 300,000 team members to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit news.fedex.com.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and fourth quarter fiscal 2012 Statistical Book. These materials, as well as a webcast of the earnings release conference call to be held at 8:30 a.m. EDT on June 19 are available on the company’s website at investors.fedex.com. A replay of the conference call webcast will be posted on our Web site following the call.

Certain statements in this press release may be considered forward-looking statements, such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, legal challenges or changes related to FedEx Ground’s owner-operators, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage acquired businesses, changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.'s and its subsidiaries' press releases and filings with the SEC.

Media Contact: Jess Bunn 901-818-7463

Investor Contact: Mickey Foster 901-818-7468

Home Page: fedex.com

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO GAAP FINANCIAL MEASURES

The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat. Excluding the reversal of a reserve associated with a legal matter and a non-cash aircraft impairment charge at FedEx Express from current results and the costs of the combination of FedEx Freight and FedEx National LTL operations and the initial recording of the legal reserve from our prior period earnings will allow for more accurate comparisons of our operating performance. Where applicable, the impacts of these events are shown net of incentive compensation impacts. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures.